Scale and efficiency in the provision of local government services

This paper investigates the size of local authority fixed and variable costs and the extent of economies of scale and scope in the provision of local services. A flexible modelling framework is used which combines elements of both short and long run cost behaviour and allows returns to scale to vary over the output range. The empirical work based upon this model suggests that there are significant fixed costs associated with the provision of local services. Local authorities exhibit overall economies of scale over most of the observable output range, with these economies resulting largely from the cost savings associated with multiple outputs.